**2. Hypotheses development**

Literature reveals that comparing the impact of the SSB on IBs' performance during crisis periods has not been fully investigated in previous studies. Responding to what has been discussed above, this chapter aims to extend the investigation of [15] by examining the impact of SSB supervision on IBs' performance during crisis periods by focusing on the financial crisis of 2008.

#### **2.1** *Shari'ah* **supervision and bank performance**

The SSB has a supra authority to prevent the BoDs from charging interest (*riba*) payments and to avoid doubtful (*gharar*) investments in their products [15]. Although economic calculation and the profit concerns of the IBs are allocated to the BoD, the appreciation of the licit character of this profit is allocated to the SSB [10]. Thus, SSBs play an important role in mitigating agency problems by acting as an additional monitoring mechanism [3, 33, 34]. SSBs offer an extra possible reduction in agency costs for IBs through organizational moral accountability constraints and shaping managerial behavior [3, 34]. As Mohammed and Muhammed [4] state, SSB is one of the four key stakeholders affecting the financial performance of IBs, besides the management, the ownership and the external auditor.

As mentioned above, SSB characteristics, for example, SSB size, crossmembership, doctoral qualification, reputation and expertise, may determine how effective the SSB is in performing its task [19, 32, 35]. Basically, SSBs' total effect should be measured using an SSB measurement that can reflect the total effect of SSB based on the most important characteristics that affect SSBs' performance [26]. Based on that, many studies used SSB score that captures the total impact of these SSB characteristics to measure SSB supervision, for examples [19, 27]. Recently, Nomran and Haron [27] find that SSBs positively affect Southeast Asia IBs' performance. That is to say that, SSB score provides the basis for the following hypotheses:

*H1: Effective SSB, as represented by the SSB score, will be positively associated with IBs' performance.*

*H2: Effective SSB, as represented by the SSB score, will be positively associated with IBs' performance even for the period during the financial crisis of 2008.*
